Whether Gateway established an enforceable agreement requiring Klocek to arbitrate his claims.
Holding
No. Gateway did not show that Klocek expressly agreed to the arbitration clause in the Standard Terms, so the court denied Gateway’s motion to dismiss and compel arbitration.
Reasoning
The Federal Arbitration Act strongly favors enforcing arbitration agreements, but arbitration remains a matter of contract. Before dismissing or staying a case for arbitration, a court must determine under ordinary state contract-formation law that the parties made a written agreement to arbitrate. Gateway bore an initial, summary-judgment-like burden to produce evidence establishing an enforceable arbitration agreement.
The governing law was itself uncertain. Kansas choice-of-law rules generally apply the law of the state where the parties performed the last act necessary to form the contract. Gateway provided little evidence about the transaction: it claimed shipment of the computer, while Klocek claimed an in-store Kansas purchase. The record therefore did not show whether the final act occurred in Kansas, Missouri, or elsewhere. The court found no material difference between Kansas and Missouri law for its immediate analysis, but held that Gateway’s inadequate showing independently prevented relief.
Under both Kansas and Missouri law, the computer sale was governed by UCC Article 2. The parties’ payment, delivery, and receipt of the computer established that a sales contract existed. The central question was instead whether Gateway’s box-inserted Standard Terms, including arbitration, became part of that preexisting sales contract.
The court declined to follow Hill v. Gateway 2000 and ProCD v. Zeidenberg, Seventh Circuit decisions treating enclosed terms as an offer that the customer accepted through retention or use. Those cases reasoned that UCC § 2-207 did not apply because only one written form was involved. Judge Vratil concluded that this limitation lacked support in the statutory text: § 2-207 also covers a written acceptance or confirmation following an oral or otherwise formed agreement, even without a classic battle of forms.
The court treated Klocek as the likely offeror, either by ordering the computer or seeking to purchase it in the store, and Gateway as the offeree that accepted through the sale or shipment. Gateway supplied no evidence that it was instead the offeror or that it disclosed at the time of sale that the deal was conditioned on later acceptance of additional terms.
Under UCC § 2-207, Gateway’s Standard Terms were at most an acceptance containing additional terms or a written confirmation. They could operate as a counteroffer only if Gateway clearly and expressly made its acceptance conditional on Klocek’s assent to those terms. Gateway did not show that it notified Klocek during the sale that it would not proceed unless he accepted the Standard Terms; merely placing those terms in the box did not clearly communicate such a condition.
Because Klocek was not a merchant, additional terms did not become part of the agreement unless he expressly agreed to them. The provision declaring that retention beyond five days constituted acceptance could not itself establish express assent when Gateway had not shown that Klocek was told of the term or of a review-and-return condition during the transaction. Silence, failure to object, and keeping the computer were insufficient under the applicable state law.
The same conclusion would follow if the enclosed terms were viewed as a proposed modification under UCC § 2-209 rather than as additional terms under § 2-207, because that theory likewise required express assent. Gateway could file a supplemental motion if it could establish that another state’s law governed contract formation, and the court would then determine whether a jury trial on formation of an arbitration agreement was necessary.